OUR MISFORTUNES MAY BE RETARDED; YOU MAY OVERCOME THE EXCESSIVE PRESSURE OF THE MOMENT, BY AGAIN FORCING OUT PAPER, AS I BELIEVE YOU ARE NOW DOING BY ALL POSSIBLE MEANS; BUT THE BLOW WILL FALL THE HEAVIER AT LAST. WE CAN ALONE BE SAVED FROM IT BY REMOVING THE SOURCE OF THE EVIL. I beg your Lordship to believe that in this address I have no object but the welfare of the country at heart, and that it is with reluctance I have found fault with your measures, rather than with any desire to condemn them. I have the honor to be, MY LORD, Your most obedient humble servant, Felix Hall, May 14, 1826. POSTSCRIPT. I HAVE remarked at the commencement of this Letter on a passage in the printed Speech of Mr. Huskisson of the 23d February last, in which that gentleman states, that the different periods of distress and prosperity which the country has recently gone through, have been accompanied the first, by great contractions; and the second, by equally great expansions, of the amount of the currency. I have stated my conviction to be, that in each instance the contraction of the currency has been a forced measure, adopted by the Government for the purpose of attempting to establish cash payments in the old metallic standard; and that such forced contraction has been the origin and cause of all that distress which Mr. Huskisson describes as coincident with it; and further, that those different expansions of the currency which he describes, arose out of measures adopted also by the Government in order to relieve that distress which they had themselves occasioned, but which they found to be in effect in ways risen with an expansion of the currency and fallen with the contraction, and in no instance so striking as in that immediately before us. tolerable. I have since been referred to a statement made by your Lordship, which establishes that with respect to the late and present distress, that distress was preceded by a great and forced reduction of the notes of the Bank of England, which form the basis of all our paper money; and any great and regular diminution of which, must of necessity be followed by an equally great reduction in all the paper money of the country. Your Lordship states (see the Times newspaper of Feb. 18, 1826, containing the report of a Speech of Lord Liverpool, of the preceding day), that, "In March 1825, they (the Bank of England) saw the necessity which was pressing on them, and they then did begin to draw in and reduce their issues. In the month of March, they reduced their issues 1,300,000l. Between the 15th March and 15th May, they made a reduction to the extent of 700,000l. more. Between August and November, they further contracted their issues, making altogether a contraction of $,500,000l. in their issues." And, "Thus then the Bank had reduced their issues between Febru ary and March 1825, from twenty-one millions to twenty millions, between May and August, to nineteen millions, and between August and November, to seventeen millions." What then was the nature of that necessity, which in March 1825 pressed on the Bank, and compelled that body so to draw in and reduce its issues? They had notes out in nearly as large an amount, making the calculation on notes of 57. and upwards, as at any former period: prices were comparatively high: the country was prosperous: but the pressure of the Act of 1819 hung over this state of prosperity, and by that Act the Bank was compelled to give gold in payment for its notes, at the old price of 31. 17s. 104d. an ounce. When the prices of all commodities had advanced, and when gold was the only commodity to be had at a low and an old rate, then gold of course was demanded; and the Bank of England, pressed by that demand, was compelled, by a regard for its own security, to withdraw its notes from circulation. The necessity which pressed on the Bank therefore, was imposed on it by the Act of 1819. If that Act had proceeded on a just and equitable principle, if a just and proportionate standard had been taken, instead of that which had no relation to the money transactions of the time, the demand for gold, which was experienced from the latter part of 1824 down to the period of the panic, would never have taken place; no necessity for such reduction of its issues would have been felt by the Bank; nor would a ruinous, sudden, and unexpected fall of prices, from March 1825 to the present time, have been witnessed, or any of that distress in which we have been involved. This, I am persuaded, will be admitted to be perfectly indisputable. It will be admitted, that no necessity of whatever kind pressed on the Bank for withdrawing its notes in 1825, except the necessity which was imposed on it by the Act of 1819. Your Lordship, in treating of different commodities that have fallen in price during the year 1825, has stated that you ascribed such depression to over-trading. But Government securities fell first in price: 3 per cent. consols, which stood in February 1825 at 95, fell before the end of November to 82; and Exchequerbills fell with them, from 37. premium to 20s. discount. This fall in the Funds, and in Exchequer-bills, cannot surely be ascribed to over-trading. It must have been occasioned by the reduction of the issues of the Bank which accompanied it; and which reduction must of necessity have had an equal effect in lowering the prices of all other property, whether over-trading had or had not existed. Mr. Huskisson finds that a contraction of the currency, depression of prices, and consequent distress, go together. It may be assumed then that one of these is the occasion of the other. In 1824, and the beginning of 1825, we find existing a condition of great and general prosperity, accompanied with high prices and a full circulation. In March 1825, the Bank, urged by Mr. Peel's bill, commences to withdraw its notes from circulation. It proceeds with this operation down to the end of November. Early in December, breaks out "the Panic." The Panic, as it was called, was a feeling of alarm in the mind of the public respecting the security of all paper money and paper credit. It arose from this, that many banking-houses, the credit of which had been hitherto undoubted, were found to be unable to discharge in notes of the Bank of England their pecuniary engagements. Now this is precisely such an evil as the operation which has been described was obviously calculated to lead to. No man who has considered this subject at all, can doubt, that the withdrawing of nearly four millions of Bank notes from circulation in the manner those notes were withdrawn, was calculated to lead to the most extensive failures and general distress. I ask your Lordship, whether you did not yourself anticipate the most calamitous consequences from this operation? whether during its progress, and more particularly during the latter part of it,during the months of September, October, and November last, -you did not anticipate consequences nearly as great as any which have since fallen on us? and whether the Directors of the Bank did not press on your consideration their apprehensions of danger which I am sure they felt? If this were the case, and it is scarcely possible to believe otherwise, your Lordship has, I think, acted most unwisely, and dealt unfairly with the country, in the exposition attempted to be given of the origin of the late and present distress. Every great and general reduction in the amount of the notes of the Bank of England, must be of necessity followed (though perhaps at an interval more or less distant) by a proportionate reduction of all that mass of monied engagements, of paper, and credit, by which the pecuniary transactions of the kingdom are carried on. The bills of exchange of the merchant, drawn for commercial transactions; the notes of the country banker, issued for the payment of wages, or to carry on the exchanges of agricultural produce; all these, in whatever part of the kingdom drawn or issued, must receive their ultimate discharge in London, in notes of the Bank of England. In 1824, and the early part of 1825, these bills and notes,-drawn for large amounts, because the goods they represented were sold at high prices, or issued in great quantities, on account of the rate of agricultural productions, required the whole extent of the twenty-one millions put in circulation by the Bank of England for their regular discharge; seventeen millions were unable to give acquittance to an amount of engagements which required twenty-one millions, and had been founded on that amount. First, then, the Bank, driven to this step by an attempt to keep to the old metal standard, withdraws its notes from circulation;-next, the bills of the merchants and the notes of the bankers are unpaid;-then come failures amongst the traders ;-bankruptcies take place;-commercial distress. We call this state of things over-trading! We are busy with some miserable nostrum; but before we can apply it, the evil has arrived at its next stage, and we are alarmed by the spectacle of laborers without employment, dying with artificial famine, and kept in subjection by the soldiery. This is overpopulation; and the next stage is agricultural distress, or overproduction. This is the course before us, and this the third time of our passing over it. Our exposition is-over-trading-farming too much speculation-too many people-too much production. We ought rather to say, over-taxation, rendered doubly oppressive by the Act of 1819. The country requires all its trade all its people-all its agricultural activity. If these were relieved from the fetters of that destructive and fatal measure adopted in an evil hour, we might rise over all other difficulties, and become as prosperous and happy, and more wealthy and powerful, than at any former period of our history. |